Lifeline phone applications: TerraCom, YourTel contract agents claim signatures forged

Signs of forgery and fraud plague two carriers

WASHINGTON, DC. - Darryl Nelson studied the completed application form in his hands. He'd never heard of TerraCom Inc., a company offering subsidized phone service through the federal Lifeline program. But there was his home address in San Antonio, Texas, and his Social Security number. There was his signature on the bottom -- misspelled and in someone else's handwriting.

"This is crazy," said Nelson, 51. "This is wrong."

Likewise, a Milwaukee woman was surprised to find her name, improperly spelled but linked to the correct address, on a TerraCom application. "I don't even know no ‘Roby,' " said Ruby Dixon, 57, shown the form at her home.

They're among at least 50 people who had applications submitted in their names, without their knowledge, for Lifeline, a Scripps News investigation finds.

TerraCom and its affiliate, YourTel America Inc., together provide Lifeline phone service in 21 states. Their issues reflect broader concerns about administration of the government program, which aims to ensure that low-income households have an open line to jobs and medical care.

Former contract agents for TerraCom and YourTel told Scripps they forged application signatures, manufactured addresses and retained legitimate applicants' Social Security numbers and other sensitive personal information.

"The people were not signing those. We were, as the workers," said Reginald Strode, 35, a former St. Louis-area contract sales agent for YourTel.

One former agent said he believes his boss "double dipped," taking TerraCom applicants' information and submitting it to another Lifeline company to collect extra commission. Scripps could not independently verify allegations.

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The Federal Communications Commission, which declined comment for this article, has warned Lifeline carriers that they face fines of up to $1.5 million if sales representatives break program rules. It hasn't specified how companies must vet and supervise agents.

The Project on Government Oversight, a watchdog group in Washington, D.C., called for stricter controls across Lifeline and close scrutiny of TerraCom's applications.

"The FCC needs to tighten up its program," said Scott Amey, general counsel.

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Launched in 1985, Lifeline expanded to wireless service in 2005. Its price tag rose from $800 million in 2009 to $2.2 billion last year, the congressional Energy & Commerce Committee reported this spring.

The introduction of cellphones contributed to abuses. Customers found ways to receive duplicates ; phone companies double-counted some customers, forged applications or failed to verify eligibility.

In response, the FCC tightened regulations last year; the number of participating households plummeted from a peak of 18.2 million last August to 13.2 million in April.

Among the roughly 2,000 Lifeline phone companies, salespeople commonly have financial incentive to enroll as many customers as possible. Agents typically get one-time commissions of $3 to $5 per enrollment from participating companies, which receive $9.25 a month for each customer household -- $34.25 for those on tribal lands. American consumers pick up the tab for Lifeline and other federal communications programs through an average $2.73 monthly surcharge on their phone bills, the Government Accountability Office reported last year.

Launched in 2004, Oklahoma City-based TerraCom's business mushroomed after acquiring YourTel in December 2010. That year, TerraCom and YourTel cumulatively received $21.3 million from Lifeline, Scripps' analysis of federal filings show. Last year, their combined Lifeline disbursements reached $89.6 million.

Troubles also have mounted for TerraCom. Last year, the FCC began investigating after learning the company had been paid multiple times for the same customers. The FCC closed its investigation after TerraCom promised to increase oversight and pay $1 million in reimbursements and fees.


Questions about the company's business practices have led to investigations in Illinois, Indiana, Oklahoma and Texas.


In Indiana, where TerraCom acquired 30,000 subscribers in less than a year, the state Utility Regulatory Commission sought answers from the firm's chief operating officer at a July hearing. Dale Schmick rejected the suggestion that his company profited by cutting corners on Lifeline oversight.

"There has to be some assumption of morality here -- that we're doing the right thing," Schmick told the panel of Indiana regulators.

He didn't acknowledge to the regulators that TerraCom had begun terminating all 700 Lifeline sales workers out of concern that rogue agents were breaking program rules.

Before terminating its sales program, TerraCom had a "comprehensive series of policies, procedures and protocols" for workers and a hotline for them to raise questions, a company spokesman said.

Had the company scrutinized an application allegedly from one woman in Fort Worth, Texas, it might have detected inconsistencies. A Scripps reporter showed Cheryl Mills , 57, an application in her name, signed Cherly. "Oh, my god," she said of the misspelled signature, which she said wasn't hers. "That's pitiful."

Scripps reporters visited Mills and scores of others after discovering their information online. In May, the news company reported that Call Centers India, a data vendor for TerraCom, had posted 170,000 Lifeline customer-application records on an unsecured website. Scripps' reporting led attorneys general in Illinois, Indiana and Texas to open investigations into the data breach.

Scripps subsequently found, and interviewed in person, 50 "applicants" in Indiana, Pennsylvania, Texas and Wisconsin who disputed signing the Lifeline applications they were shown. Sometimes, TerraCom collected multiple applications -- up to six per person.

After Scripps presented these disputed applications to Schmick, a company spokesman said TerraCom had approved 31. He expressed confidence that, of those, 21 came from eligible customers -- but couldn't explain why the remaining 10 were approved.

Former agents attribute violations to a company culture that prized results over process.

"It's about speed, quickness, money," said Strode, the former agent in suburban St. Louis. Strode said he questioned a team leader about having to sign others' names. "I was told, ‘Don't worry about it. Just do it so it can get done.' "

Strode said he forged signatures on all 57 Lifeline applications he submitted while working for YourTel for six weeks in May and June. YourTel approved 41, Strode's records show.

Strode said his regional supervisor instructed him to generate fake home addresses and falsely state that he'd checked whether an applicant's household already received Lifeline service.

That supervisor, Chris Watson -- released in July with the rest of the company's Lifeline sales staff -- denied instructing Strode to do anything illegal. "The system was so legit," he said of the application process during a phone interview.

Much of Strode's account was corroborated by a former TerraCom agent in another state, who said his regional boss also told him to forge signatures. This agent knew of applicants Scripps had found in the TerraCom files. Now working for another Lifeline provider, he requested anonymity to avoid losing his job.

While working for TerraCom last year, the agent said he collected and signed about 200 applications. He estimated the company approved roughly 80 of them.

The agent said his boss once set him up at a table bearing a TerraCom competitor's banner. He said he believed the boss submitted the same applicants' information to both TerraCom and its competitor to generate extra commission. He "was getting paid out from both," the agent said.

Schmick, unfamiliar with the allegation, said he didn't know whether TerraCom forbade its agents from simultaneously working for competitors.

Both Strode and the unnamed agent said they, not applicants, initialed Lifeline documents attesting to eligibility.

A TerraCom spokesman said "those responsible should be held accountable."

He pointed out that Strode was terminated in June for attempting to sell a free phone; Strode said it was over a $70 pay dispute.

Strode told Scripps he had felony convictions for theft. A review of FCC's Lifeline regulations shows no requirement for companies to conduct criminal background checks on its sales force. Nor does TerraCom itself call for such measures, a spokesman said. Strode called that "reckless on the part of whomever hired me."

Nearly a month after Strode's dismissal, he opened his personal laptop to show a reporter dozens of digital photos of driver's licenses and food stamp cards taken during the Lifeline application process. Strode said he didn't know he was supposed to delete the sensitive records.

The FCC told Scripps that a single privacy violation can trigger a $1.5 million fine for Lifeline companies.

TerraCom agents receive training on "all the state and federal requirements," Schmick told Indiana regulators in July.

"Man, there ain't no training," said Strode, the former agent.

Nor is the company monitoring social media. For nearly a year, the "TerraCom Wireless Corpus Christi" Facebook page has invited Lifeline recipients to violate program rules by giving their Lifeline-activated phones to those "who may not qualify." Scripps notified Schmick of the posting in July. As of Sept. 10, it was still online.

EDITORIAL - Lifeline phone program needs FCC's closer oversight of TerraCom, YourTel America and other carriers (

(Reach reporter Isaac Wolf at Scripps News' Jim Osman contributed to this report; email For more on this investigation, click here.)

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